Methane Guiding Principles Signatory Reporting

PAO NOVATEK January 15th 2021

COMPANY: PAO NOVATEK

DATE: January 15th 2021

YEAR OF JOINING METHANE GUIDING PRINCIPLES: 2020

SENIOR REPRESENTATIVE: Mark Gyetvay, Deputy Chairman of the Management Board

Principle One: Continually reduce methane emissions

2020 completed activity 2021 intended activity

Russian environmental standards consider Our 2021 environmental improvement plan to methane as a pollutant, and methane emissions reduce methane emissions will be achieved in must be accounted for and compensated by several directions: environmental payments (in 2020, the pay rate is USD 1.6 for 1 ton of CH4), and in the case of - Waste heat exchangers are used at gas exceeding the established limits the emissions compressor units and power plants for heat must be compensated by fines (hundredfold generation to replace boiler fuel gas. Fuel gas increase). In addition, methane is the main savings through such replacement with component of NOVATEK’s commercial products, secondary energy resources also has a and its loss contradicts the Company’s commercial secondary benefit on emissions reduction. interests. - Using solutions to reinject produced water Lean Production Program. In 2020, we into wells instead of flaring using horizontal implemented a project for sustainable use of flare units. produced water at our East-Tarkosalinskoye field. Previously, reservoir water, which is produced - Reduction of emissions in the process of well along with hydrocarbons, was sprayed in testing (gas and gas condensate wells). horizontal flares to evaporate at a high temperature, causing emissions. The new technical solutions reinject produced water into wells to maintain reservoir pressure to avoid produced water flaring as well as avoid pollutant emissions including methane emissions. By the Company’s calculations, the methane emissions reduction totaled 7 tons in 2020.

In 2020, NOVATEK joined the Methane Guiding Principles (MGP) Initiative to implement new methods and practices to further determine, prevent and reduce methane emissions based on MGP Best Practice Guidance.

What are your organisation’s total methane emissions? 2020 completed activity 2021 intended activity

2020 emissions data will be presented in 2021. In 2021, methane emissions are expected at 8.4 thousand tons due to NOVATEK’s methane emissions reporting scope covers production, expected production growth. processing and LNG production facilities of the Company’s subsidiaries and joint ventures. Methane emissions are calculated NOVATEK’s methane emissions based on the Company’s share in hydrocarbons production. reporting scope covers production facilities, hydrocarbon processing The following core assets are included in methane emissions scope: facilities, and LNG production facilities for Company’s subsidiaries OOO NOVATEK-Yurkharovneftegas 100% and joint ventures. Methane OOO NOVATEK-Tarkosaleneftegas 100% emissions are calculated based on the Company’s share in hydrocarbon AO Arcticgas 50% production. The growth is expected ZAO Nortgas 50% at OOO NOVATEK-Chelyabinsk 100%, OOO Arctic LNG 2 60%, OOO Obskiy OOO Yargeo 100% LNG 100%. OAO Yamal LNG 59.97% In 2020, methane emissions by ZAO Terneftegas 51% source and value chain component AO NOVATEK-Pur 100% are expected at the following levels:

OOO Arctic LNG 2 60% - production facilities – 8060 tons; - hydrocarbon processing facilities OOO NOVATEK-Purovsky plant 100% – 120 tons; and

OOO NOVATEK-Ust-Luga 100% - LNG production facilities – 220 tons. OOO Cryogas-Vysotsk 51% OOO NOVATEK-Chelyabinsk 100% OOO NOVATEK-Transervice 100% OOO NOVATEK-Energo 100% OOO Sabetta International Airport 100%

Emissions data for 2020 by source and value chain component will be published in 2021.

NOVATEK’s subsidiaries and joint ventures use over 20 methods to calculate methane emissions to estimate methane emissions as a separate compound. The methods are adapted to specific types of activity or equipment, responsible for hydrocarbons emissions. In particular, feed and fuel gas composition, gas consumption and equipment operating time, the conditions for the emissions discharge to the atmosphere (temperature, pressure, flow rate, presence of related substances) are taken into account.

Does your organisation report methane intensity? If so, please specify the intensity. 2020 completed activity 2021 intended activity

To calculate methane emissions intensity, gross To calculate methane emissions intensity, gross methane emissions (from production, hydrocarbon methane emissions (from production, hydrocarbon processing and LNG production) in the numerator are processing and LNG production) in the numerator are divided by hydrocarbon production (gas, gas divided by hydrocarbon production (gas, gas condensate, oil) in mln boe in the denominator. condensate, oil) in mln boe in the denominator. In 2021, the estimated methane intensity is 14.5 tons The numerator data is received directly from the per mboe. operational sites based on instrument measurements and certified equipment methodologies that take into account the composition and volume of fuel consumed and transported feedstock.

The denominator data is derived from well measuring gauges, and the data is converted to boe in accordance with the hydrocarbon mix composition at each field.

Do you have a methane emission target? 2020 completed activity 2021 intended activity

NOVATEK’s targets include production, hydrocarbon NOVATEK’s environmental strategy plan extends up processing and LNG production. Targets represent to 2030. The Company approved a target to reduce methane emissions intensity (CH4 emissions in tons methane emissions per unit of production in the per annum per unit of production) compared with production, processing and LNG segments by 4% the base year intensity (2019). compared to 2019 level.

In 2020, NOVATEK approved the target to reduce methane emissions per unit of production in the production, processing and LNG segments by 4% compared to the 2019 level for the period up to 2030.

The progress in achieving this target will be published in 2021 after the 2020 emissions disclosure. The overall emissions are a function of production volumes, new operational sites commissioning, implementation of innovative emissions reduction technologies, continuity of operations, and other factors.

Principle Two: Advance strong performance across the gas supply chain 2020 completed activity 2021 intended activity

To assess methane emissions across the value chain, As part of the initiatives of industry partnerships, NOVATEK strives to interact with companies in alliances and active work with stakeholders, exploration and production, supply, processing and NOVATEK plans to improve the effective mechanisms marketing to organize relevant research. of methane emissions management (including the best practices for assessing, detecting and NOVATEK suppliers are subject to the requirements eliminating leaks), as well as effective reporting of the environmental standards in the regions of systems in accordance with MGP principles and best operations, principles of responsible natural practices. resources use and environmental protection. In 2020, the Company approved the Supplier Code of Conduct In 2021, NOVATEK plans to expand collaboration for NOVATEK Group Suppliers. NOVATEK expects that across the value chain to discuss the Company’s its suppliers should comply with the principles of targets to reduce methane emissions. In particular, sustainable development included in the Code companies will be encouraged to conduct exploration (https://www.novatek.ru/en/about/management/). without natural gas venting to the atmosphere, introduce the practice of Associated Produced Gas To enhance and improve the Occupational Health (APG) and treated wastewater injection into deep and Safety (OHS) management system, a absorbing horizons of geological formations, reclaim memorandum of cooperation for OHS between PAO disturbed lands with restoration of vegetation cover, NOVATEK and AO Total E&P Russie was signed. The and apply other practices and technologies to reduce memorandum is aimed at promoting long-term, methane emissions and ensure its long-term fixation effective and mutually beneficial cooperation in the biomass of ecosystems and geological through the exchange of best practices and formations. experience in improving the OHS management system.

Principle Three: Improve accuracy of methane emissions data 2020 completed activity 2021 intended activity

To reduce the negative impact on the environment, a Russian developers are updating the methodologies multi-stage environmental operational control for methane emissions calculations, and currently system is in place at the Company’s enterprises. The this process is also encouraged by the state regulator. majority of our large industrial enterprises have a In 2019-2020, the Russian Federation Ministry of chemical laboratory fully equipped for identification Natural Resources and Environment started building and analysis of the emissions composition including a special register of methodologies for calculating methane. Other enterprises engage specialized emissions. The developers need to pass through an organizations, which have the necessary equipment approval procedure by the Ministry to be included in and qualified personnel. the register. During 2021, NOVATEK will monitor the process of updating the methodologies, interact with Most of the Russian methodologies used for methane the developers and the regulatory bodies in order to emissions calculation do not use generic emissions improve the accuracy of data calculations at factors. On the contrary, their core basis is modelling, NOVATEK Group. direct measurement statistics and mass balance approach. The methodologies are elaborated for In addition, in 2021, we plan to further expand and calculating methane emissions from specific sources improve the instrumental, laboratory and such as flare units, gas turbine compressor units, tube methodological base for industrial control of furnaces, fugitive sources, etc. atmospheric emissions of pollutants, including methane.

Principle Four: Advocate sound policy and regulations on methane emissions

2020 completed activity 2021 intended activity

NOVATEK advocates efficient methane emissions In 2021, the “Strategy for socio-economic policies and regulations to stimulate early actions, help development of the Russian Federation with the to improve performance, and to ensure compliance, low GHG emissions levels until 2050” is expected to flexibility and innovation. be elaborated and approved. The Strategy pays considerable attention to the carbon sink capacity In 2020, the Russian Gas Society, including NOVATEK as of forests and other ecosystems. NOVATEK plans to a member, applied to the Russian Federation participate in the discussion of legislative initiatives Government with an initiative to remove methane and strategic documents related to the regulation from the list of pollutants in order to avoid double of GHG emissions (including methane) and other counting in regulation of CH4 emissions - as a toxic activities towards the business climate neutrality pollutant and as a greenhouse gas. This initiative is and regions of its operations considering the related to the ratification of the Paris Agreement by absorbing capacity of ecosystems and geological the Russian Federation in September 2019 that will formations. require Russian oil and gas companies to take additional measures to reduce methane emissions. The In 2021, NOVATEK awaits the approval of the Federal Law “On the state regulation of greenhouse “Methodology for calculating emissions from gases emissions and absorption” is meant to become projected flare unit considering the air feed to the the main framework document regulating GHG combustion zone” by the Ministry of Natural emissions. This Law’s draft prepared by the Ministry of Resources and Environment of the Russian Economic Development is currently undergoing Federation to be implemented at Yargeo. From discussion and approval procedures. 2021, the determination of the APG flaring at

Yargeo will be conducted in accordance with the In order to create a universal methodology for determining pollutant emissions during APG flaring, a new methodology. “Methodology for calculating emissions from projected flare unit considering the air feed to the combustion zone” was developed for our subsidiary Yargeo.

The methodology implements the methods for quantifying the maximum one-time and gross atmospheric emissions capacity from flare units taking into account the volume of ventilated and injected air feed to the combustion zone during APG flaring.

According this methodology, the following pollutants are accounted for at Yargeo: carbon monoxide CO, carbon dioxide CO2, nitrogen monoxide NO, nitrogen dioxide NO2, soot (“black carbon” C), benzo[a]pyrene C20H12, sulphur dioxide SO2, residual methane CH4 (chemical underburning).

Principle Five: Increase transparency

2020 completed activity 2021 intended activity

NOVATEK’s methane emissions disclosure includes: The Company will improve its reporting on the results and planned activities for methane emissions control - Annual Reports for federal statistical and reduction in NOVATEK’s Sustainability Report 2020 observation according to Rosstat templates. (the Report will be published in July 2021) The data goes into the regional and federal reports on environmental protection (in The Company is planning to support a program to particular, state reports on the environmental standardize the external methane emissions reporting protection in Yamal-Nenets Autonomous to simplify the preparation process with possible Region are published on the following website participation of other organizations. at https://dprea.adm- nao.ru/ekologiya/doklady-o-sostoyanii- okruzhayushej-sredy-v-neneckom- avtonomnom-okruge/, in Leningrad Region, at https://nature.lenobl.ru/ru/deiatelnost/ohrana- i-monitoring-okruzhayushej-sredy/);

- NOVATEK’s Sustainability Report (https://www.novatek.ru/en/development/).

NOVATEK annually reports on its GHG emissions including methane emissions, and energy efficiency of operations via the global Carbon Disclosure Project (CDP, https://www.cdp.net/en).

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